GOP, White House might find common ground on housing finance reform

House Republicans are hoping their broad effort to wind down mortgage giants Fannie Mae and Freddie Mac will be buoyed by an unlikely ally — the Obama administration.

The fight over what to do with the government-sponsored enterprises (GSEs) has been a partisan battleground for years, but now Republicans are indicating they see an opening — thanks to a February report from the Obama administration.

{mosads}Sens. John McCain (R-Ariz.) and Orrin Hatch (R-Utah) on Thursday introduced a bill that mirrors one introduced in the House on March 18 by Reps. Jeb Hensarling (R-Texas) and Spencer Bachus (R-Ala.).

The measure would rapidly wind down the GSEs, freeing them from government support in two years, and then either making them wholly private entities or eliminating them altogether after five years.

“We’re on the hook for trillions of dollars worth of exposure,” Bachus said. “The housing market needs long-term certainty and it’s never too early to get taxpayers off the hook.”

Hensarling introduced his bill in the last Congress, first as a stand-alone measure. He then pushed to have it included in the Dodd-Frank financial reform law. That effort was ultimately defeated in the Senate, where it was voted down along party lines.

Hensarling said Thursday he hopes the “third time will be the charm” on his legislation. When asked what is different this time around, since the Senate is still controlled by Democrats, Hensarling pointed to the White House.

Specifically, he cited the administration’s February report as a positive sign that congressional Republicans and the White House may be able to find common ground, at least in some areas of the housing market.

“That’s something that wasn’t signaled before,” he said.

The first option offered by the administration, in which the government’s role in the housing market is limited to targeted support for low- and middle-income borrowers, represents an “80 percent confluence” with the GOP legislation, Hensarling said.

His comments represented the latest example of Republicans striking a delicate balance when it comes to the administration’s report.

Minutes before pointing to the report as wind in the sails for his legislation, Hensarling was criticizing the White House, saying its report was less of a plan than a “menu of options.”

The document called for the winding down of Fannie and Freddie and a major re-entry of the private sector into a housing market where the government currently buys nine out of every 10 new mortgages — items that had been major Republican priorities while in the minority in the last Congress.

That leaves Republicans praising areas of the report while pointing out that the GOP had been pushing for change first.

Bachus, who leads the House Financial Services Committee, told reporters Thursday that the administration “took some of our ideas” for its report. When it was first released, Bachus too criticized the administration for not putting together a “real plan.”

But he also told Treasury Secretary Timothy Geithner, when he appeared before Bachus’s committee on March 1 to testify about the plan, that Republicans were ready to work with the administration on the issue.

If anything, the apparent common ground between Republicans and the White House could up the pressure on congressional Democrats to begin working on the issue as well, as there is broad agreement that the current state of the housing market is unsustainable.

But if Democrats want to put together their own housing proposal, particularly in the Senate, where they retain a majority, some leading Republicans are saying they need to do their homework.

Sen. Richard Shelby (R-Ala.), the ranking member of the Senate Banking Committee, said Tuesday that it would be “premature” to consider any proposals on housing finance reform until the complex issue has been more thoroughly scrutinized.

“Without that examination, I fear the committee will again yield to the temptation of picking a solution before it has accurately described the problem,” he said. “Legislation should be driven by facts, not by pre-determined outcomes.”

He went on to say the committee should not “repeat the mistake” of the Dodd-Frank financial reform law, which he critiqued as “partisan legislation that is full of technical problems and that has had serious adverse unintended consequences.”